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Friday, 19 August 2011

50% of Individuals Worry about Debts

More than 50% of individuals are concerned about their debts according to leading trade body R3.

The latest results, from the insolvency trade body R3’s Personal Debt Snapshots, reveal a 7 per cent rise in debt concern compared to the same time a year ago, according to the quarterly tracker.

Frances Coulson, R3 President said: “Households that are already struggling may find traditional lenders unwilling to provide further credit and are therefore drawn to short-term credit solutions. Individuals turning to short-term loans and credit cards should be wary of the high interest rates that often accompany these products. Overall debt can quickly snowball out of control.”

Credit card debt worries have increased by 5 per cent on the last quarter, whilst payday and short term loan worries have risen by 2 per cent, hire purchase concerns by 3 per cent and store card worries by 1 per cent.

Despite this, fears over secured lending have fallen. Mortgage repayment concerns are down by 4 per cent and bank loan doubts have decreased by 2 per cent.

Frances Coulson commented on the trend: “Concern about secured lending is also likely to have fallen due to the Bank of England continuing to keep interest rates at an historic low. Households have begun to feel comfortable that their mortgage repayments will remain as they are for the foreseeable future.”

13 million individuals are saving less than they used to and one in five consumers are putting off big financial decisions.

“Early 2011 was a tough period as individuals struggle to keep control of their finances and felt uncertain about the future. It is encouraging to see people have started to bolster their savings and pay off their debts. But we must remember that financial distress is still higher than it was a year ago.

“Delays in taking big financial decisions are up considerably on last year, indicating that the public is still hesitant about what the coming months have in store,” Frances Coulson said.

“With around six million people employed in the public sector in the UK, significant redundancies could result in increased insolvency levels. More people have started saving and paying off their debts, so these reserves should serve them well if they do face a period of unemployment. Those struggling with debt should seek financial advice rather than dealing with the distress on their own,” she added.